Just as the sweet news that a bill that would require approval of its Keystone XL pipeline passed the U.S. House of Representatives last week, TransCanada has run into some sour opposition to the development of the project.
Under H.R. 3408, “The PIONEERS Act”, authority over permitting Keystone XL is transferred from the President to the Federal Energy Regulatory Commission (FERC). The bill also instructs FERC to approve the pipeline within thirty days if the permit remains in compliance with the U.S. State Department’s Final Environmental Impact Statement (FEIS), which concluded that building the pipeline was the preferred option.
House Energy and Commerce Committee Chairman Fred UptonOf course, legislation still has to make its way through the upper house, but the mood seems hopeful that this legislation will get Keystone XL built sooner rather than later. As House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) was quick to point out, Keystone XL is "a true shovel-ready project that will create tens of thousands of jobs, without costing the taxpayers a dime.” For manufacturers and distributors of valves, actuators and controls, it is certainly a project that could contribute mightily to an even healthier outlook for the industry in 2012.
While TransCanada is doubtless happy about the direction the legislature is taking, the position of some Texas landowners against the efforts of the company to obtain easements for the pipeline is not going over so well. Several landowners along the proposed pipeline route say TransCanada has bullied them into selling their property by using “condemnation proceedings”.
Basically, TransCanada is arguing that Keystone XL would be a “common carrier” pipeline under Texas law. Common carrier in this case is the pipeline equivalent of a public roadway, and easements for public roadways are acquired through eminent domain, if necessary. Trans-Canada says the pipeline meets the common carrier status because it transports oil owned by other companies, with whom it has delivery contracts, and that it is in the public’s best interest because the oil will help the United States meet its demand for energy.
However, opponents say that, to qualify as a common carrier, the pipeline company must agree to transport oil for hire from any company, based on published fees that are regulated by the state, and that TransCanada’s pipeline does not qualify because it will only be oil from Canadian oil sands that is being transported. Basically the argument is that this is a case of a private company using what is supposed to be a tool used only by governments for the public good to generate private profit.
Property owners in a separate case recently took their cause to court when Denbury Resources wanted to build a CO2 pipeline, and tried to use eminent domain to get an easement over a Houston-area farm. In that case, the Texas Supreme Court ruled that Denbury could not take property for private use. This decision is being seen as a test of the ability of private pipeline companies to use eminent domain, and raises the bar of proof. Are pipeline builders acting in the broader interest of the public, or do they meet the criteria for a common carrier?
For the politically charged Keystone XL project, a court case about the use of eminent domain is just about the last thing TransCanada needs.